Monday, July 26, 2004

DAY OF THE DEMOS

Most Indicators are still coming down off Bullish/Contrary readings, so the downtrend is probably not quite over for the market as a whole. Exceptions are the VIX, which soared over 15% last week to 16.5 -@ 20 was the previous recent level for tops which provoked serious rallies both in mid-March and mid-May. Also, the Public to NYSE Specialist ratio jumped to 2.52,a 17-year high which, if you do the math, was 1987, a year of Infamy. The Dow dividend is at a recent high of 3.09%, also Bullish for stocks; and the SPX stocks are sitting on a high $1/2T of CASH. Some feel that spending this money ( on cash dividends, etc.)would lower credit ratings of the companies, hurting stocks. The IBD cites the SPX p/e ratio (operating earnings) at 17.7, just like March of '03. The 70-year average is 15.6, just below current.
Also hurting our markets are the lessening of Money Supply and the slowdown in Asian (especially Japan) investment here in recent months, probably due to similar worries of the Election, terrorism and interest rate creep.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, July 19, 2004

Dow Doldrums

Both Barron's and CNBC's talking heads are commenting about the narrow Trading Range the market has been in most of this year - unfortunately, most of the Sentiment Indicators are likewise quiescent. With the leading Indices at or below support levels (previous horizontal and 200-day MAs), we can only hope for a possible Inverse Head-and-Shoulders bottom, although unusual in a Re-Accumulation phase near the top of a trend. So far Volume seems to confirm one, if we do not break below the Head of mid-May on increasing Volume.
One safeguard would be to buy shares of a Bear fund such as URPIX which has a 2:1 leverage, meaning you have to buy 1/2 as much to hedge your portfolio ( USPIX would be better to hedge Nasdaq stocks).
Of my favorite Sentiment Indicators, only the Public/Specialist shorting is near an extreme (effective in Jan and June this year, with the Public being right); IBD's Short Interest chart is near  the highs where it correctly forecast tops last Sept. and Jan.'04. Bullish signs include an overall IBD put/call ratio at 1 and a Bullish divergence of the Advance/Decline line improving with the market descending. Also enticing, the DJIA dividend yield is just below $3, a recent record. 


With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, July 12, 2004

Critical Market Juncture

With 80% of past Election Year second half's showing up markets, this one is starting quite ugly; even Friday's up day was on very weak Volume at 1.1B shares NYSE. However, with both the DJIA and SPX right on the 200-day MA, a bounce could be expected very soon, just as the ratio-adjusted McClellan Oscillator bounced up off the zero line this past week - which has recently shown rallies when not following through to the downside. Concomitantly, the CBOE Equity put/call ratio spiked up to a Bullish 85 where for 8 of the last 8 topping spikes have provoked rallies. The ISEE put/call is also high at 202 - that is the 4-year-old International Securities Electronic Exchange, the first option exchange to announce going public this week. Also, for what it's worth, the DJIA dividend ratio, at 2.89, is near its 5-year high; and Public/Specialist shorting crossed up over the 2 mark, as survey Bears remain in the teens, both contrarian Bullish signals. Next support levels, should this "lite" support area break down, would probably be 1075-SPX; 9900 DJIA.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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Monday, July 5, 2004

Statistic Sampling

Although both Fundamental and Technical Analysts rely on historical statistics (Those who ignore history ...) it is always wise to temper these with observation and caution. For example, on tonight's Nightly Business Report the well-respected Jeremy Seigel cited a survey on Election Year market performance the last few months leading up to the Election. Average % Up if a Republican wins: 4.8% since 1948, then another 4.2% in Nov.Dec. , much superior to Democratic victories; however, the following year reverses if a Democrat wins :6% vs. 9%.
When Drug companies seek FDA approval thousands of samplings are needed, as with political and economic surveys - how reliable is a handful of samplings? What is the likelihood of the market improving 4.8%this year? Very little! So we can use them as tentative guides, but warily.
Sentiment Indicators for the week: The ISE put/call ratio (I-SEE) approached a dangerous level of 210, a negative sign, as is the Mutual Fund cash dropping to 4.7% in the IBD survey. Also negative is the low Bearish outlook on both the Investor's Intelligence and AAII market surveys ( 17.4% and 15.7%-down from a mid-May 40-, respectively). Most other Indicators remain neutral for now.

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance


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